Income Gap Keeps Growing

by | POSTED: Jun 17, 2013

A picture is worth a thousand words.

The above graph is from “Income, Wealth, and Inequality” – published February 2103 by Citizens for Public Justice. The narrative below is taken in full from a Fact Sheet published by the CPJ. You can download the full report HERE. You can also download other fact sheets HERE.

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Over the past 30 years, the gap between Canada’s highest and lowest earning families has  grown. On average, the highest earning 20% of Canadian families saw their after-tax incomes  increase by 36.9% during this period, while “the average after-tax incomes of the lowest 20% rose by 20.3%”  (Statistics Canada, 2010 as cited in Citizens for Public Justice, 2013, p. 13).

In contrast to the increasing wages of  CEOs, middle-income positions are becoming rare and low-wage sectors now employ 25% of the population, paying  approximately $13.33/hour in 2012 (Yalnizyan, 2011 as cited by Citizens for Public Justice, 2013, p. 10). According to  Yalnizyan, this group of workers also experienced the largest decrease in hourly wages (an average of 2.25%) between  2009 and 2011 (as cited by Citizens for Public Justice, 2013, p. 12).

The volatility of wages for this earning group  increases their household debt levels and leads to greater wealth inequality. Between 1984 and 2005, households in  the lowest 10% experienced a decrease in wealth or assets from -$2100 to -$9600, (Citizens for Public Justice, 2013,p. 15). This group and other households making less than $50,000 are also six times more likely to have a high debt  service ratio (Hurst, 2011 as cited by Citizens for Public Justice, 2013, p.17). As this group struggles with credit debt,  an inability to accumulate assets and high debt servicing costs, the top 10% of the population hold 14% of total wealth  (Canadian Business, 2012 as cited by Citizens for Public Justice, 2013, p.15).

The CPJ believes that the Canadian government is perpetuating this phenomenon. In the 1990s, the tax-benefit system  offset 70% of the inequality increase; now, these programs offset less than 40% of the rise in inequality (OECD, 2011  as cited by Citizens for Public Justice, 2013, p.13). This weak tax-benefit system, the 5% overall decrease in tax  revenues (36% to 31% of GDP since the mid-1990’s) (Broadbent Institute, 2012 as cited by Citizens for Public Justice,  2013, p.13) and low interest rates encouraging consumer spending are likely to have negative social and economic  implications for the country.

On the world scale, a rank of 24 out of 34 OECD members for income inequality has  replaced Canada’s past position as a proponent of job creation and economic growth (OECD, 2011 as cited by Citizens  for Public Justice, 2013, p.13). This poor reputation and the risk of increased crime, erosion to public health care or the  lack of opportunities for future generations should motivate the government to promote a more equal society through an  increase in income tax revenues and investment in social programming for the lowest deciles (Wilkinson & Pickett,  2009 as cited by Citizens for Public Justice, 2013, p.13).

Many Canadians believe that something has to be done to  address this growing problem in our country. According to the results of a 2012 Broadbent Institute poll, 77% of  Canadians agree that income inequality is a problem and 89% believe that the government should find solutions to this  problem (Broadbent Institute, 2012 as cited by Citizens for Public Justice, 2013, p.14).

Families at the top 20% of income earners now account for 47.5% of the country’s total market share; in 2011, the top  1% of the population held 14% of total wealth (Citizens for Public Justice, 2013, p. 3).

These values are the motivation  for international movements such as the Occupy Movements, which demonstrate the public’s concern over issues such  as income inequality. As well, the comparison between the recoveries of recessions in the 1980’s and 2008 provide  interesting conclusions about the influence of global economy and recovery tactics on inequality.  This report targets individuals or groups who are interested in income inequality and lobbying the government to reduce  the income gap in Canada, providing many visuals, a glossary, as well as graphs and charts to explain this growing  problem and illustrate the comparisons between Canadian income earners over time.

Specifically, the CPJ suggests  that the Standing Committee on Finance will use similar timely and relevant information while conducting its income  inequality study this spring (Citizens for Public Justice, 2013, p. 2). As Canadians are becoming increasingly aware of  these discrepancies, the government and other concerned stakeholders should begin to take more active and  progressive steps towards promoting equality and decreasing the economic gap between Canadians.

Reviewed by Vanessa Zembal